Digital Pound considered by Treasury and Bank of England

The Treasury and Bank of England are considering the introduction of a digital pound in the UK with the launch of a new consultation paper on the topic. 

Seen as a ‘risk-free’ way to ‘replicate the role of cash in a digital world’, a digital pound would be issued by the BoE and be worth the same as the physical pound to be interchangeable with cash. 

Chancellor of the Exchequer Jeremy Hunt said: ‘While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use. 

‘That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.’

Whilst it is thought that the digital currency will be needed in the future, no decision has yet been made to introduce the system and a Technology Working Paper published alongside the consultation posits 2025 as the earliest possible date for pilot tests. 

The Bank of England has previously looked into the possibility of using the technology with a discussion paper on new forms of digital money published in June 2021 before a summary of responses was released early last year. 

Andrew Bailey, Governor of the Bank of England, said: ‘A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability. 

“However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the Bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.’ 

Guidance on the topic released by the BoE states that the virtual currency would likely be limited in how much individuals and businesses could hold at first and would be intended for payments made online, in-store, and to family and friends rather than for savings. 

Benefits of the technology listed by the BoE and the Treasury include that it would be supported by a ‘fast, resilient, secure technology platform’, be subjected to rigorous standards of privacy and not be anonymous, and be able to be seamlessly managed through digital wallets. 

The consultation reflects comments made recently by Prime Minister Rishi Sunak who highlighted innovation in technology as one of the key ways to grow the UK economy. 

You can view the consultation paper and submit your response on the Bank of England website here.

Photo by Steve Smith